There was no denying that Zynga, the maker of notable games such as “FarmVille” and “Words with Friends”, was losing market share to its rivals. However, numerous investors were hopeful that the lucrative online gambling business would turn their fortunes around.

There was only one flaw with this plan: real-money gaming is illegal in the United States, and although there are signs that individual states will soon be allowed to reset these laws, Zynga doesn’t have the time to wait around.

“Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free social gaming, including social casino offerings,” the San Francisco-based company said in a statement.

To make matters worse, the announcement led to another hit on the company’s stock. In after-hours trading, Zynga’s shares fell another 14%, closing out at $3.02. This is a far cry from its original $10 IPO price.

To breathe some life into the dying company, earlier this month, Zynga made former Xbox boss Don Mattrick the company's CEO. Mattrick and founder Matt Pincus believe that they must go back to their roots, re-embracing the free social game model that once brought them to the top. “We need to get back to basics and take a longer term view on our products and business, develop more efficient processors and tighten up execution all across the company,” Mattrick said in a statement.

Surprisingly, Zynga’s quarterly results were actually slightly better than what investors had expected, reporting a $231 million revenue during this period (31 percent lower than last year’s results). Nevertheless, the company is in dire straits and is in need of another hit title to make them relevant for a second time.